Google Inc. (GOOG)
Discount cash flow analysis
5% margin of safety What's this?
Sensitivity matrix
|
-1% |
Discount Rate % 0% |
1% |
||
|---|---|---|---|---|
| -1% | $420.59 | $412.44 | $404.64 | |
| Terminal Growth% | 0 | $425.08 | $416.73 | $408.74 |
| +1% | $429.68 | $421.13 | $412.95 |
How does a change in discount rate or terminal growth affect valuation?
This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate
Valuations and comments
- Valuecruncher created a new valuation of $592.20 (undervalued by 4.78%) - 3 hours ago
- GordonGekko created a new valuation of $589.34 (undervalued by 7.15%) - 1 month ago
- GordonGekko created a new valuation of $542.07 (overvalued by 7.73%) - 3 months ago
- sundjn created a new valuation of $402.92 (overvalued by 30.5%) - 3 months ago
- kuangxiaohui created a new valuation of $456.49 (overvalued by 19.91%) - 3 months ago
- ensayofr created a new valuation of $232.04 (overvalued by 57.97%) - 4 months ago
- ensayofr created a new valuation of $270.60 (overvalued by 50.99%) - 4 months ago
- mobajwa created a new valuation of $456.35 (undervalued by 3.0%) - 7 months ago
- GordonGekko created a new valuation of $448.59 (undervalued by 3.92%) - 9 months ago
- tekne created a new valuation of $558.16 (undervalued by 39.93%) - 10 months ago
- tekne created a new valuation of $312.92 (overvalued by 21.55%) - 10 months ago
- Lespe959 created a new valuation of $412.53 (undervalued by 3.42%) - 10 months ago
- GordonGekko created a new valuation of $412.09 (undervalued by 2.14%) - 10 months ago
- SethWellbourne created a new valuation of $392.92 (undervalued by 3.0%) - 10 months ago
- SethWellbourne created a new valuation of $521.71 (undervalued by 52.24%) - 11 months ago
- rthwrm created a new valuation of $370.11 (undervalued by 12.1%) - 11 months ago
- mlongval created a new valuation of $370.11 (undervalued by 12.1%) - 11 months ago
- GordonGekko created a new valuation of $369.98 (undervalued by 12.06%) - 12 months ago
- GordonGekko created a new valuation of $369.64 (undervalued by 16.27%) - 1 year ago
- rs12345 created a new valuation of $253.99 (overvalued by 16.9%) - 1 year ago
- rs12345 created a new valuation of $283.27 (overvalued by 7.32%) - 1 year ago
- nzvikram created a new valuation of $616.76 (undervalued by 74.67%) - 1 year ago
- tiger created a new valuation of $279.25 (overvalued by 0.06%) - 1 year ago
- rjbullock created a new valuation of $260.06 (overvalued by 0.9%) - 1 year ago
- dweis created a new valuation of $273.41 (overvalued by 8.07%) - 1 year ago
- KiwiEMH created a new valuation of $318.88 (undervalued by 2.86%) - 1 year ago
- anoop249 created a new valuation of $472.63 (undervalued by 26.87%) - 1 year ago
- TheCrunchBlog created a new valuation of $416.73 (undervalued by 22.87%) - 1 year ago
- KiwiEMH created a new valuation of $337.31 (undervalued by 1.6%) - 1 year ago
- TheCrunchBlog created a new valuation of $352.67 (overvalued by 7.44%) - 1 year ago
- TheCrunchBlog created a new valuation of $304.96 (overvalued by 29.25%) - 1 year ago
- TheCrunchBlog created a new valuation of $493.88 (undervalued by 9.96%) - 1 year ago
- GordonGekko created a new valuation of $438.65 (undervalued by 5.91%) - 1 year ago
- veter created a new valuation of $175.18 (overvalued by 58.29%) - 1 year ago
- KiwiEMH created a new valuation of $479.36 (overvalued by 0.78%) - 1 year ago
- TheCrunchBlog created a new valuation of $481.94 (overvalued by 11.13%) - 1 year ago
- andrew created a new valuation of $285.51 (overvalued by 47.58%) - 1 year ago
- acoy created a new valuation of $487.70 (overvalued by 16.06%) - 1 year ago
- benkepes created a new valuation of $346.02 (overvalued by 39.96%) - 1 year ago
- andrew created a new valuation of $260.15 (overvalued by 54.61%) - 1 year ago
- MarkC created a new valuation of $528.69 (overvalued by 4.74%) - 1 year ago
- Sam created a new valuation of $473.45 (overvalued by 14.69%) - 1 year ago
- TheCrunchBlog created a new valuation of $590.39 (undervalued by 8.87%) - 1 year ago
- TheCrunchBlog created a new valuation of $363.22 (overvalued by 33.02%) - 1 year ago
- TheCrunchBlog created a new valuation of $507.85 (overvalued by 6.35%) - 1 year ago
- sthapit created a new valuation of $456.39 (overvalued by 15.84%) - 1 year ago
- GordonGekko created a new valuation of $1038.75 (undervalued by 97.32%) - 1 year ago
- TheCrunchBlog created a new valuation of $1038.75 (undervalued by 97.32%) - 1 year ago
- ffarin created a new valuation of $476.03 (overvalued by 9.57%) - 1 year ago
- matrixxx created a new valuation of $220.11 (overvalued by 54.74%) - 1 year ago
- DART created a new valuation of $223.63 (overvalued by 55.51%) - 1 year ago
- GordonGekko created a new valuation of $606.64 (undervalued by 9.3%) - 1 year ago
Comments
The boring details
| All amounts in millions | Figures |
| Enterprise Value: | 163,506 |
| Net Debt (Long-term borrowings less cash): | -14,218 |
| Equity Value: | 106,650 |
| Number of Shares Outstanding: | 314,000,000 |
| Calculated value per share: | $416.73 |
Enterprise Value is the present value of the post-tax cash flows for a business into the future.
Where:
- C1, C2, C3 - the cash flow in period 1, 2, 3, ...
- r - the discount rate
To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.
Where:
- Cn - the cash flow in the final forecast period.
- LTG - the long-term growth rate
- r - the discount rate
- g - the terminal growth rate
The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.
Where:
- rt - the risk free rate
- t - the tax rate
- B - the beta of the company
- MRP - the Market Risk Premium
Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.
This valuation is part of this blog post:
http://blog.valuecruncher.com/2008/10/running-the-numbers-google-goog-trading-well-below-our-estimated-intrinsic-value/
Assumptions
In 2007 $GOOG had annual revenues of US$16.6 billion and an EBITDA margin (profits) of 40.7%. Reuters aggregates 26 analysts covering $GOOG and these have mean estimates of 2009 and 2010 revenues of US$22.4 and US$27.9 billion respectively. For our analysis we have used US$22.0 billion in 2008, US$27.0 billion in 2009 and US$32.5 billion in 2010. We have forecast EBITDA margins remaining flat at 40% to 2010. We have estimated capital expenditure in 2008 at US$3.075 billion rising to US$3.75 billion in 2010 and at US$3.25 billion beyond that. Capital expenditure dropped dramatically in quarter three to US$452 million from US$697 million the previous quarter. We don’t believe that capital expenditure will remain at the current level (Q3). All of these assumptions can be amended in the Valuecruncher on-line valuation model to adjust the valuation.
Other Model Assumptions:
Discount Rate: 11.0%. We believe the discount rate is in the 9-11% range. We have used the upper end of this range to reflect the uncertain market conditions that $GOOG signalled in the announcement.
Terminal Growth Rate: 6.0%. The US economy grew at an average of 3.6% over the last five-years. $GOOG showed that while growth is slowing there is still more to come.
Our analysis incorporates the cash the $GOOG balance sheet – Valuecruncher calculates a net debt number.